Selling TVs isn't the profitable business it used to be. And it's only going to get worse.

EACH year, as the holiday season approaches, pundits pull out their crystal balls and issue the usual predictions of increased consumer-electronics sales, specifically focusing on display-centric gadgets such as laptop computers and televisions.

But this year is different. Televisions are no longer the "must have" purchase on Black Friday. To be sure, there will be plenty of TVs sold between late November and early January, with another surge just before the Super Bowl.

The catch? Those sales will be driven by overly aggressive price discounting and not by 3-D, Internet connectivity, Skype, or any of the other bells and whistles that have migrated over to televisions in the past few years.

These are indeed tough times for TV manufacturers, with only two (Samsung and LG) showing a profit, and three legendary Japanese brands (Sony, Panasonic, and Sharp) struggling to maintain an increasingly smaller piece of the worldwide TV market while operating on the negative side of the ledger.

Other Japanese TV brands are also facing a tough future. After a well-needed reality check, Hitachi withdrew months ago from TV manufacturing and sales. Mitsubishi continues to sell small, ever-dwindling quantities of rear-projection TVs, while Toshiba maintains a low profile, advocating for autostereo 3-D and watching its market share evaporate.

How Did We Get Here?

This tectonic shift of gravity in the TV business started in the mid-1990s as upstart Samsung (yes, it was considered an upstart at the time) set its sights on becoming "the next Sony," a mission the company accomplished just over a decade later. The Samsung brand now appears on nearly 30% of all TVs shipped around the world, which is a mind-boggling turn of events.

According to NPD, Samsung's revenue share for Q4 '11 was 26.3%, a year-to-year (Y-Y) growth of 18%. LG Electronics finished far behind in second place with 13.4% revenue share, an increase of 2% Y-Y. The Japanese "big three" (Sony, Panasonic, and Sharp) captured 22.6% of TV revenue combined, an average decrease of 19% Y-Y.

These trends have only accelerated. For the record, Samsung's revenue share during the period April–July of 2012 was 28.5%, representing 18% Y-Y growth. LG managed to kick its share up to 15.2%, flat from a year previously. And the "big three" combined for a 20.1% revenue share, a drop-off of about 32% from the previous year.

It wasn't that long ago (early 2006, to be exact) when a Japanese manufacturer led the rankings. Back then, Sharp had well over 20% of TV revenue share all to itself. Today, the company wrestles with cash-flow problems and is struggling to keep its worldwide share at or above 5% (it's already below 3% in North America), is taking out more loans while its stock price continues to plummet, and has sold 46% of its Sakai Gen 10 fab capacity to Hon Hai Chairman Terry Gou, as reported by various news organizations' stories earlier this year.

Sony hasn't made a profit during the 8-year period that it has been selling flat-screen TVs and has ended its LCD manufacturing venture with Samsung (S-LCD) while also withdrawing its 7% stake in Sharp's Sakai LCD fab.

Panasonic has idled 50% of its LCD and plasma fab capacity as it finishes digesting the acquisition of Sanyo and is finally back on the road to profitability – that is, in businesses besides televisions. And it can only watch as market share for its signature plasma TVs continues to evaporate: NPD reports that plasma TVs accounted for just 6.1% of all TV shipped in Q2 '12, a Y-Y fall-off of 26%.


"[Holiday TV] sales will be driven by overly aggressive price discounting and not by 3-D, Internet connectivity, Skype, or any of the other bells and whistles that have migrated over to televisions in the past few years."



The roots of this decline go back to the big digital-TV transition that started in the late 1990s. In the space of a decade, consumers abandoned tape-based video playback to digital optical disc, tossed out their bulky and small cathode-ray-tube TVs in favor of larger and flatter plasma and LCD screens, discovered the amazing image quality of high-definition TV, and reveled in the new widescreen aspect ratios offered by digital video formats.

The peak of this frenzy hit around the holiday season in 2005, when LCD and plasma TVs were literally flying off the shelves. Back then, a "good deal" on a 42-in. flat-screen TV was in the neighborhood of $2500, while 50-in. models were closer to $5000. High-end brands such as Pioneer (remember them?) could still command upwards of $7000 for its premium plasma TV sets, and rear-projection technology featured LCD, LCoS, and DLP technologies fighting for supremacy.

But things changed in 2008. By then, a majority of consumers who wanted a new flat-screen TV had purchased one. The entry of low-cost volume discounters including Vizio and the late Syntax Olevia and the popularity of buying clubs (Costco, BJ's, and Sam's Club) started pushing down TV prices, a trend augmented by excess LCD-panel inventory after overly optimistic sales forecasts prior to the 2006 football World Cup and 2008 Beijing Olympics.

The worldwide recession that started in late 2007 didn't help, as declining home values and ever-increasing oil prices put a crimp on big-ticket purchases. DVD sales (and later, rentals) started to drop off in 2005, replaced by the growing adoption of video streaming from YouTube and later Netflix and Hulu.

If At First You Don't Succeed, Part I

The TV industry fought back in 2009 with (of all things) 3-D. James Cameron's highly anticipated 3-D movie Avatar set box-office records around the world and stimulated 3-D releases at other studios. That, in turn, drove TV manufacturers to come out with 3-D TVs using active-shutter eyewear.

By all accounts, 3-D TV has been a non-starter. And manufacturers made matters worse by locking up the rights to 3-D Blu-ray discs for one or more years, adding them to exclusive "bundles" of 3-D TVs, Blu-ray players, and 3-D glasses. (The first 3-D bundle from Panasonic featured a 50-in. plasma TV, two pairs of glasses, a Panasonic 3-D Blu-ray player, and the Avatar disc for about $2800.) These locked-up deals meant a trickle of new 3-D releases to watch – hardly the way to kick-start a new viewing paradigm.

Not long after, LG announced it was aban-doning active-shutter 3-D (where it wasn't com-petitive) for passive 3-D, using TVs with film-patterned retarders and super-cheap glasses. And Toshiba promptly responded that it was developing a line of "glassless" autostereo 3-D TVs. The usual coalitions and alliances were formed to promote each technology, but the net effect for most consumers was to drive them away from 3-D TV purchases altogether as they perceived another format war brewing a la HD DVD and Blu-ray, and opted to sit on the sidelines.

Even 3-D movie releases have seen a decline in box-office revenue as the initial 3-D thrill has worn off, largely due to higher ticket prices for 3-D releases and consumer perceptions of minimal extra value for the additional dollars. The result? Fewer movies released in 3-D, meaning less content to watch in 3-D.

It didn't help that dedicated 3-D video channels were few and far between. DirecTV's venture into 3-D has largely been shut down, while the Sony/Discovery/IMAX 3-D offering continues. Panasonic's sponsorship of 3-D coverage of the 2012 Olympics was a bold move, but did not return enough eyeballs to stimulate interest in 3-D TV sales. As a result, 3-D has devolved into a built-in menu function to newer models of LCD and plasma TVs, some of which are now available for less than $1000.

If At First You Don't Succeed, Part II

The explosive growth of streaming video led to the introduction of so-called "smart" TVs about 5 years ago. These TVs could directly access popular Internet video content from YouTube and Netflix, with Hulu and Vudu added over time. Other popular services offered back then included USA Today, Pandora Internet radio, and a host of photo-sharing Web sites.

Some of these sets evolved into full-blown Internet browsers, capable of taking the viewer anywhere to watch Internet video. Additional "apps" and links were added to NBA TV, Major League Baseball, Facebook, Twitter, and specialized content delivery sites for 3-D videos. Wireless Internet connections were offered as an option and later became standard. Sales of Internet-connected Blu-ray players rose, but not for playback of optical discs: Buyers were using them to access Netflix on older TVs that didn't include these "smart" features.

All well and good, except for one major problem: Lack of standardization of the user interface. Every TV manufacturer had its own way to access Web content and streaming video (Panasonic's VieraCast, Samsung's Apps, etc.), and none of them were compatible; a flaw that resulted in negative consumer opinion.

Google decided to step into the fray and solve this problem with its own Internet video search engine (Google TV), which launched in 2011 and was an abject failure. Undaunted, Google tried again earlier this year, partnering with Sony and LG and building the navigation interface directly into the TV. Consumers still rejected it, so Google TV looks to join other failures along the road to "connected" television.

It didn't help Google TV that 70% of all Internet video viewing comes from three sites – YouTube, Netflix, and Hulu. Plus, YouTube has its own video search engine, and it works quite nicely. Realistically speaking, if you had already purchased a new flat-screen TV in the past 5–7 years and just wanted to access Netflix, that $150 connected Blu-ray player with WiFi made a lot more sense than a new TV.


"In the space of a decade, consumers abandoned tape-based video playback to digital optical disc, tossed out their bulky and small cathode-ray tube TVs in favor of larger and flatter plasma and LCD screens, discovered the amazing image quality of high-definition TV, and reveled in the new widescreen aspect ratios offered by digital video formats."


OK – Now What?

So here we stand, just weeks from Black Friday, wondering what (if anything) will kick-start sales of TVs. That task was further complicated by a September NPD DisplaySearch report that worldwide TV sales had declined 8% Y-Y in the second quarter of this year, led by a sharp decline in demand in Japan, of all places.

China, on the other hand, saw a 6% increase in demand. And among all geographic regions, China shows the strongest interest in 3-D and Internet connectivity. In the meantime, numerous studies on this side of the Pacific Ocean show that Americans just want big, cheap televisions and are largely disinterested in 3-D and Internet connectivity. (Same for consumers in Great Britain and Canada.)

Pricing trends show that discounts carry the day above all else. Back in January, it was possible to buy a 60-in. Panasonic plasma for $995. The year before, a 55-in. Insignia (Best Buy house brand) LCD TV was the ticket at $997. But that hasn't helped Best Buy, as the company continues to lose money and shut down stores in favor of a shift to mobile-device sales and services.

And therein lays the crux of the problem: Smaller screens are what's "hot' right now. People want the latest smart phones and tablets, and they're using these gadgets to stream video where they might have used portable TVs previously. (Any readers still have a combo DVD player/TV? Bet you haven't used it in a while….)

Remember all of those counter-top and under-cabinet LCD TVs that were attention-grabbers at the CEDIA and CES shows? They're largely being replaced by iPads, which can be used anywhere in the kitchen. Or the living room, or outside. Or in a plane, or on a train, or in the back seat of a car, or on a bus….

This "second screen" trend bears watching, for it will determine how display fabs will be best utilized in the future. Terry Gou's purchase of 46% of Sharp's Gen 10 Sakai output wasn't aimed at making TV sets, but to procure smaller LCD panels for Apple products. (Although the long-rumored Apple TV could also use Sakai glass, if and when the product ever comes to market.)

In the meantime, Sharp is making the best of a bad situation by concentrating on "mega" TV sizes, including a 70-in. LED-backlit design that has already been offered for $1999 earlier this year; an 80-in. TV that retails for $5000, and a new 90-in. monster that will sell (initially) for $10,999. The problem is, you can't sustain a TV business on such large TVs, which constitute a very small percentage of all TVs sold worldwide, as most people simply do not have the room for screens that large.

Panasonic, which formerly protected its plasma business by keeping its LCD TV offerings below a 42-in. screen size, has now accepted reality and expanded to 42-, 47-, and 55-in. sizes, with 60+ in. coming soon. Sony has announced an 84-in. 4K TV that will sell for $20,000. (JVC, a minor player in consumer televisions, will also sell the 84-in. 4K panel in its own product.)

And LG – who stirred up the pot by announcing at CES that it would begin shipping its 55-in. OLED TVs in the fourth quarter of this year – has quietly backed away from that announcement due to manufacturing yield issues and will instead promote the aforementioned 84-in. 4K LCD platform. (Never mind that there's no 4K content to watch on these TVs at present.)

For the Holidays

What are we likely to see for this year's holiday TV offerings? Pretty much the same thing we've been seeing for months – aggressive pricing, particularly in the most popular screen-size category (40–49 in.), incremental improvements in features, more bundles with Blu-ray players, cheaper active-shutter 3-D glasses (they've dropped in price from about $150 apiece in 2009 to less than $50 now), more WiFi connectivity, the usual Internet apps and links, and some new bells and whistles such as voice and gesture recognition (currently available on selected models of Samsung LCD and plasma TVs).

We'll also see more wireless connectivity among cameras, phones, and set-top boxes as consumers want to stream content throughout their homes, including movies on Blu-rays and DVDs. However, none of these offerings is likely to kick-start TV sales in the fourth quarter, which may lead to more retrenching in Japan.

We may also see one or more Japanese brands finally give up as they recognize the halcyon days of TVs flying off the shelves will never come back, just as the legendary TV brands in the U.S. slowly disappeared in the 1980s as a result of Japanese competition.

For TV manufacturers, the period from Black Friday through late January may well be the "winter of our discontent… ." •


"Among all geographic regions, China shows the strongest interest in 3-D and Internet connectivity. In the meantime, numerous studies on this side of the Pacific Ocean show that Americans just want big, cheap televisions."


Pete Putman is president of ROAM Consulting, Inc., based in Doylestown, PA. His company provides training, marketing communications, and product testing/development services to manufacturers of projectors, monitors, integrated TVs, and display interfaces. In addition, he maintains, a Web site that covers digital TV, HDTV, and display technologies. He can be reached at